Egypt’s 1st short-term securitization for LE 167M closed: Premium Int'l

CAIRO - 24 November 2019: Premium International for Credit Services announced Sunday the closing of Egypt’s first short-term securitization transaction, worth LE 167 million and backed by a portfolio of consumer card receivables in the total value of LE 184 million.

“The bond, which consists of a single 10-month tranche with a fixed coupon rate of 12.59 percent, received a 'Prime 1 Rating', the strongest amongst other Egyptian bond issuances as quoted by Middle East Ratings and Investor Services (MERIS),” the company clarified.

According to the company, the issuance is the first transaction of its kind under a securitization bond issuance program to be issued in favor of Premium International for Credit Services. The transaction was approved by the Financial Regulatory Authority FRA and falls under the new Short Term Debt Instrument decree no. 172 of 2018.

“The offering was successfully subscribed by AAIB for a 50 percent share, while the remaining 50 percent were subscribed by several prominent investment funds,” it added.

Premium International noted that a consortium consisting of the leading financial, banking and legal institutions collaborated jointly on this first short term securitization transaction in Egypt, where EFG-Hermes acted as lead arranger, book-runner and underwriter, while Arab African International Bank (AAIB) was tapped as underwriter, placement agent and custodian of the transaction. Dreny & Partners was the legal advisor and KPMG -the auditor for the transaction.

“Premium was a pioneer in introducing consumer credit back in 2002 with its innovative, first-of-its kind zero-interest and bank-free installment cards. We are proud to be the first company and originator of a short-term securitization transaction in Egypt and to achieve the highest credit rating, thanks to our unique and innovative debt collection strategy that ensures minimum default rates by consumers,” Founder and CEO of Premium International Paul Antaki said.

“This is the first tranche of Premium’s two-year program of issuing LE 2 billion short-term securitized bonds, an attempt to diversify the financing sources and to off load our balance sheet through monetizing LE 2.5 Billion worth of net present value of receivables associated with debt collection and consumer credit, “ Antaki added.

Co-Founder and Board Member of Premium Card Rami Antaki commented on the issuance, saying: “I am proud to add that the first asset-backed short-term bond issued by Premium International for Credit Services, received this highest rating, reflecting the cautious building over the years of a resilient and diversified portfolio of consumer card receivables, originated under our highly strict underwriting and servicing standards and procedures.

“The company will use proceeds from the transaction to improve Premium Card’s short-term liquidity position, strengthen its financial position, extend its borrowing limits with banks and support the company’s future growth plans.”

“Looking ahead, the offering is reinforcing our highly regarded status in the market by exposing our portfolio to international rating agencies," Rami Antaki added.

For his part, Co-head of investment banking at EFG Hermes Mostafa Gad said that EFG Hermes has taken the initiative to pave the way by issuing the first short-term securitization transaction under the new STDI decree, adding that not only is this issuance was the first of its kind from a tenor perspective, but also the first in the consumer finance industry.

“Setting up an independent team dedicated to debt capital markets came to execute our strategy of diversifying our services in markets where we already operate, parallel to our successful geographic expansion drive that has taken our world-class advisory services to newly-entered Frontier Emerging Markets. We look forward to working closely with Premium with regards to the remaining issuances under the first short term program, approved by the FRA in October, amounting to a total of LE2 billion over a period of 2 years,” added Gad.

Additionally, Vice Chairman and Managing Director of Arab African International Bank Sherif Elwy said, "We at Arab African International Bank highly believe in the great potential of the debt market and its existing instruments, as well as contributing to the introduction of new innovative instruments, which come in line with the general direction of the Financial Regulatory Authority (FRA) and the sentiment of the Egyptian financial sector. Therefore, we are honored to have joined forces with the reputable team that has worked on the release of the first issue of short-term securitized bonds in the Egyptian debt capital market.”

Elwy added that AAIB proudly shared its vast experience and knowledge gained from being an active player in many successful securitization transactions over the past years by undertaking the role of the underwriter, placement agent in addition to its important role as the transaction’s custodian. “Furthermore, AAIB's successful business partnership with Premium International for Credit Services and its deep understanding of its services and business model has unquestionably contributed to the accomplishment of this transaction.”

On Nov. 20, the Financial Regulatory Authority (FRA) approved a program issuing short-term securitization bonds worth LE2 billion, according to FRA Head Mohamed Omran. Omran added that, as a part of this program, FRA agreed to issue two short-term securitization bonds for Premium International for credit services.

Omran stated during a conference for announcing the issuance of the first short-term securitization for payment of Premium card that the first offering is worth LE 167 million, while the second will be worth LE 497 million.